The Non-Controlling Shareholders' Activism and Stock Price Crash Risk : Evidence from Chinese Listed Manufacturing Companies

The cases that controlling shareholders expropriate the rights and interests of other shareholders frequently appeared in China, thus, encouraging non-controlling shareholders to actively participate in corporate decision-making was advocated by the public. However, whether non-controlling shareholders participate in decision-making has a positive impact on enterprises has not reached a consistent conclusion. Based on the effective supervision hypothesis and the catering effect hypothesis, this paper empirically studied the influence of non-controlling shareholders' activism to participate in corporate decision-making on stock price crash risk by taking the voting data of Chinese listed manufacturing companies from 2007 to 2016 as samples. The results show that: (1) there is a significant negative relationship between non-controlling shareholders' activism and stock price crash risk, which supports the effective supervision hypothesis. (2) the cross-sectional grouping study shows that the negative relationship between the activism of non-controlling shareholders and the stock price crash risk is more significant in non-state-owned, worse performance, non-cross-listed enterprises and enterprises audited by non-Big-Four accounting firms. (3) the mechanism analysis shows that the activism of non-controlling shareholders to participate in decision-making reduces stock price crash risk through alleviating the agency problem between managers and controlling shareholders and restraining the tunneling behavior of controlling shareholders. After accounting for the sample self-selection problem and conducting a series of robustness tests, the conclusion of this paper still remains. This paper not only deepens the research on the factors influencing stock price crash risk, but also helps us understand the role of non-controlling shareholders in corporate governance. It is of great significance to deeply understand how to prevent stock price crash risk and promote the healthy development of the capital market in emerging market countries